In housing, there's loads of capital looking for homes to buy. In transport, we don't know where the money's coming from. Wouldn't it be nice if we could use the money attracted to housing to also pay for transport which would then enable us to build at scale and deliver the huge amount of homes we need with the resources we have?
Even better, what if we could do this in a way which took the pressure off our existing transport networks, helping to address congestion at the same time as we provided housing?
Well, we can. But we are going to have to do things a lot differently.
Auckland's approach to constraining land prevented the flow of large land holdings onto the development market. That meant development at scale was very difficult. This undermined productivity and drove up house prices.
The Unitary Plan now allows significant urban intensification -- though much of it through urban infill not well aligned with public transport -- and large future urban areas at Dairy Flat, Hobsonville, Helensville, Papakura and Pukekohe.
While this provides more land for housing, allowing fringe development adjacent to motorways increases trip distances and motorway dependency.
On the other hand, enabling urban infill across the city that is poorly aligned with public transport increases traffic density and makes congestion much worse.
When transport planners don't know where development will go, they can't provide transport capacity in advance. We're making congestion worse by not providing enough direction about where to invest our transport dollars.
A major new urban development -- the Innovation City -- can solve both sides of the housing and transport problem.
If central government and Auckland Council were to partner with existing land owners or purchase and aggregate land outside the defined metropolitan boundary, and rezone it for development, then the public could realise much, if not all, of the resulting capital gain in land value. That capital gain could then be used to subsidise the infrastructure needed to support the new development.
The potential for capital gain is vast. Currently, land sells for as little as $100,000 and $200,000 per hectare -- or $10,000 to $20,000 a section -- in areas not zoned for development in the Unitary Plan. Future Urban Zoned land would sell for roughly 10 times that.
In contrast, a zoned and serviced 500sq m section in Papakura right now costs close to $500,000. That's $5 million per hectare (setting aside half the land for transport, parks and schools). Four million dollars-plus per hectare goes a long way to funding development costs.
At the moment this money is being captured by private land holders who are actually incentivised not to develop land because the longer they hold it the greater their no-risk capital gain. As soon as they try to develop, they're exposed to development levies, interest rates, market fluctuations and other investment risks.
The government and council can break the cycle of land value increases, land banking and slow housing supply by aggregating land and creating the opportunity to build at scale.
Picking a location optimised for transport could also revolutionise mobility for Auckland.
For example, imagine if land around the rail line in Auckland's south was aggregated and rezoned for high density residential and commercial development.
The area between Pukekohe and Papakura offers lots of advantages. There's a railway line already in place. The airport is nearby. The motorway has room for expansion. Industrial land already exists at Drury.
The water comes from the south, the power comes from the south and even the aggregate needed to build the city comes from the south.
Harnessing these resources to our advantage, we could create a "live, work, walk and play Innovation City" designed to world's best practice.
The new city would be built to enable public transport and walking from the start. It would not be an afterthought delivered at great expense.
Auckland's third rail line would be delivered and express rail services provided between the new city zone and the Auckland CBD, putting the new city site within 45 minutes of Auckland's heart.
Arterial roads would be rolled out or corridors protected before developers moved in, dramatically reducing the cost of construction.
What's more, we could gain huge efficiencies from co-ordinated development of infrastructure at scale instead of piecemeal investment everywhere. A targeted rate would be placed across the entire area to pay for infrastructure which could be either privately or publicly funded. Then the whole development would be tendered out to major private developers, with a government underwrite to purchase a minimum number of homes.
The underwrite would carry the requirement to meet certain targets for jobs, affordable homes, parks and other amenities.
Access to uninflated land would give the developer the buffer they need to roll out housing at the price point Aucklanders can afford.
Growth provides us with a unique opportunity. If we act now, we can design the kind of future we want.
Stephen Selwood is Chief Executive of Infrastructure New Zealand.
